The Effort to Renew Harvard’s PILOT
Harvard and the city of Cambridge have missed their end-of-year deadline for renegotiating Harvard’s Payment in Lieu of Taxes program, which replaces a portion of the property taxes that the University is otherwise exempt from paying, Cambridge City Manager Yi-An Huang ’05 announced this week. While the city still has time to reach a deal before its current PILOT program with Harvard expires at the end of June, failure to do so by then will leave Cambridge without a PILOT agreement with Harvard for the first time in more than three decades.
“I’m disappointed that we have not been able to finalize an agreement with Harvard to meet this timeline,” Huang wrote in an email to the City Council. Huang was previously optimistic in an October interview that the original deadline would be met. But in a Dec. 6 interview with The Crimson, his attitude had sobered: there, he cautioned that the city “always expected that this might not be an incredibly easy conversation,” while declining to specify what points of contention had held up negotiations between the two parties.
PILOT programs ask tax-exempt institutions with large endowments, like Harvard and MIT, to pay a fraction of what they would pay in property taxes to support the city’s budget. Many cities depend on property taxes as a primary source of revenue, and lose out on millions in potential funds from the large tracts of land that nonprofits like universities and hospitals sit on. Harvard’s land in particular is extremely valuable: Harvard Yard alone is valued at over $1.5 billion.
Harvard and MIT’s current PILOT agreements were both negotiated in 2004, although MIT’s agreement, unlike Harvard’s, won’t be up for renewal until 2044. In his December interview with The Crimson, Huang emphasized that the passage of time had increased the need to change the terms of the program. “I have a deep appreciation for the role that Harvard plays in our local community, from investing in our schools to powering our local economy. However, the challenges we face today are different and deeper than twenty years ago,” Huang wrote in his email to councilors.
“We are seeking a fair PILOT program and a more substantive agreement that reflects Harvard’s commitment to our local community, the cost of public services provided to the University, and its continuing partnership with Cambridge,” he added. Harvard participates in separate PILOT programs with Cambridge and Boston that are both in the process of renegotiation. Negotiations between Harvard and the two cities have taken on striking similarities.
The University pays about $4 million to both cities each year, where it collectively owns hundreds of acres. Both cities are also currently facing their own budget crises, and both see an opportunity to offset those shortfalls by hiking Harvard’s annual PILOT payments — though the final number will likely turn out to be just a drop in the bucket, given that their municipal budgets collectively reach into the billions.
But each city has also struggled to realize such a deal, even after months of discussions. Boston officials have been working since at least this summer to exact commitments from Harvard and other large institutions to hand over more cash for its voluntary PILOT program, which Harvard has fallen well short of for the last 12 years.
darryll k. jones